Assuming he common stock currently sells for $100 a share if the firm's marginal tax rate is 40 percent. The WACC is: 7.54%.
Weighted average cost of capitalFirst step
PV= 1162+50= (1212)
FV= 1000
PMT= (100×10)/2= 50
N= 20×2= 40
CPT I/Y= 3.94×2= 7.88%
Second step
Market value
1212×100,000=121,200,000
120×1,00,000=120,000,000
100×5,000,000=500,000,000
Total Market value $741,200,000
Percentage
121,200,000/741,200,000=0.1635
120,000,000/741,200,000=0.1619
500,000,000/741,200,000=0.6746
Third step
12/120= 10%
2.53%+(0.85×0.06)
0.0253+0.051
=0.0763×100
=7.63%
Hence:
WACC=0.0788×[.1635(1-.4)]+(0.1619×.10)+(0.6746×0.0763)
WACC=(0.0788×0.0981)+(0.1619×.10)+(0.6746×0.0763)
WACC=0.00773028+0.01619+0.05147198
WACC=0.07539×100
WACC=7.54% (Approximately)
Inconclusion the WACC is: 7.54%.
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What is a standard of living?
A. The lowest level in a social class
B. The ability to provide for your needs and wants
C. The arrangement of people in a society
D. A list of purchases you hope to make in your lifetime
You have just discovered an error in the implementation plan that will prevent you from meeting a milestone date. The BEST thing you can do is: Select one: a. Develop options to meet the milestone date. b. Change the milestone date. c. Remove any discussion about dates in the project status report. d. Educate the team about the need to meet milestones.
The best thing one can do after discovering an error in the implementation plan is to develop an options to meet the milestone date.
What is an implementation plan?An implementation plan refers to a plan that outlines the steps to take when trying to accomplish a shared goal, objective, preset goals etc.
Thus, the option of develop an options to meet the milestone date will help to ensure the meeting holds
Therefore, the Option A is correct.
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Which of the following is true of the master budget of a company?
a. It is a moving 12-month budget.
b. It corresponds to the calendar year of a company.
c. It is a comprehensive financial plan for an organization as a whole.
d. It is always prepared for a 5-year period.
Answer:
C, it's a plan for the entire organization.
Assume that in recent years both expected inflation and the market risk premium (r M − r RF) have declined. Assume also that all stocks have positive betas. Which of the following would be most likely to have occurred as a result of these changes?a. Required returns have increased for stocks with betas greater than 1.0 but have declined for stocks with betas less than 1.0.b. The required returns on all stocks have fallen, but the decline has been greater for stocks with lower betas.c. The required returns on all stocks have fallen by the same amount.d. The average required return on the market, rM, has remained constant, but the required returns have fallen for stocks that have betas greater than 1.0.e. The required returns on all stocks have fallen, but the fall has been greater for stocks with higher betas.
Answer: e. The required returns on all stocks have fallen, but the fall has been greater for stocks with higher betas.
Explanation:
The beta of a stock reflects the stock's sensitivity to a movement in market returns. Used in the Capital Asset Pricing Model, it can be used to calculate Required Return by the formula;
Required return = Risk free rate + Beta * Market risk Premium.
This formula shows that if market risk premium were to decrease, the decrease in required returns will be more for stocks with higher betas.
For instance, Assume two stocks. Stock A has a beta of 4 and Stock B has a beta of 2.
Assuming that the risk free rate is 4% and the Market premium went from 10% to 6%, the stock required return will be;
Stock A
Initial required return = 4% + 4 * 10% = 44%
Return after fall in Market premium = 4% + 4 * 6% = 28%
Return fell by = 44 - 28 = 16%
Stock B
Initial required return = 4% + 2 * 10% = 24%
Return after fall in Market premium = 4% + 2 * 6% = 16%
Return fell by = 24 - 16 = 8%
Stock A required return fell more than Stock B's because it had a higher beta.
If output is given by a Cobb-Douglas production function, real GDP is growing at 4%, the capital to labor ratio is constant, and the labor force is growing at 1.5%, what is the growth rate of the Solow residual
Based on the capital to labor ratio and the labor force growth rate, the growth rate of the Solow residual is 2.5%.
What is the Solow Residual?
This is the part of the growth in real GDP that is not as a result of an increase in capital or labor. The capital remained at zero growth and the labor was growing at 1.5%.
The Solow residual growth rate will then be:
= Real GDP growth rate - Labor force growth
= 4% - 1.5%
= 2.5%
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Suppose that with free trade, the cost to the United States of importing a sweater from Mexico is $20.00, and the cost of importing a sweater from China is $18.00. A sweater produced in the United States costs $25.00. Suppose further that before NAFTA, the United States maintained a tariff of 15% against all sweater imports. Then, under NAFTA, all tariffs between Mexico and the United States are removed, while the tariff against imports from China remains in effect. Assume that the tariff does not affect the world price of sweaters.
Before NAFTA, the United States imported sweaters from: _________
Based on the price of sweaters, it was likely that because NAFTA, the United States imported sweaters from China.
Why did the U.S. import sweaters from China?Nations will generally import from nations that charge the cheapest amount for the goods and services being imported.
Before NAFTA made Mexican sweaters cheaper thanks to the removal of tariffs, Chinese sweaters were cheaper at $18.00 which means the U.S. likely imported sweaters from China.
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Scott Company had sales of $12,350,000 and related cost of goods sold of $7,500,000. Scott provides customers a refund for any returned or damaged merchandise. At the end of the year, Scott estimates that customers will request refunds for 0.8% of sales and estimates that merchandise costing $48,000 will be returned. Journalize the adjusting entries on December 31 to record the expected customer returns. Refer to the Chart of Accounts for exact wording of account titles.
The adjusting journal entries to record the adjustments in the books of Scott Company are as follows:
Journal Entries:December 31;
Debit Sales $98,800
Credit Cash Refundable $98,800
To record expected cash refunds.Debit Inventory $48,000
Credit Cost of goods sold $48,000
To record expected merchandise returns.Data Analysis:Sales = $12,350,000
Cost of goods sold = $7,500,000
Estimated percentage refunds = 0.8% of sales
Expected Refunds = $98,800 ($12,350,000 x 0.8%)
Returned goods = $48,000
Sales $98,800
Cash Refundable $98,800
Inventory $48,000
Cost of goods sold $48,000
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On January 1, 2021, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $200,000 in cash. The equipment had originally cost $180,000 but had a book value of only $110,000 when transferred. On that date, the equipment had a five-year remaining life. Depreciation expense is computed using the straight-line method. Ackerman reported $300,000 in net income in 2021 (not including any investment income) while Brannigan reported $98,000. Ackerman attributed any excess acquisition-date fair value to Brannigan's unpatented technology, which was amortized at a rate of $4,000 per year. What is consolidated net income for 2021
Answer: $322,000
Explanation:
Consolidated income = Net income from Ackerman + Net Income from Brannigan + Excess depreciation - Amortization of unpatented tech - Gain from transfer of equipment
Excess depreciation = New depreciation of equipment - Old depreciation
Depreciation is straight line;
= (200,000/5 years) - (110,000/5)
= $18,000
Gain from transfer of equipment
= Sales - Book value
= 200,000 - 110,000
= $90,000
Consolidated income = 300,000 + 98,000 + 18,000 - 4,000 - 90,000
= $322,000
Consider the market for meekers in the imaginary economy of Meekertown. In the absence of international trade, the domestic price of meekers is $40. Suppose that the world price of meekers is $39. Assume that Meekertown is too small to influence the world price of meekers once it enters the international market. If Meekertown allows free trade, then it will meekers. Given current economic conditions in Meekertown, complete the following table by indicating whether each of the statements is true or false. Statement True False Meekertownian consumers were worse off without free trade than they are with it. Meekertownian producers were worse off without free trade than they are with it.
Answer:
it's not just the way you look like you do it and you don't want it was in the best place an artist would have said you would have been playing a little bit more and a little more of the time than you would be okay with a little more than one thing in a while you have a better th the better th and a lot more than a lot more to me for a while and it was the best thing in my office for the first one of the year now I think it is the most popular movie in a long sleeve and the better of the game end is a great deal of that is it for a while now and it's a good thing in this world and the other thing you have is the fact of that matter of the day for a good reason and the better th and more of a good thing to say
will
ur
8. In the section that asks when you
are available to work, you will want to
a. be vague.
b. say "when ever."
c. make sure to clearly list the time
range and days.
d. It doesn't matter.
it
Answer:
will
ur
8. In the section that asks when you
are available to work, you will want to
a. be vague.
b. say "when ever."
c. make sure to clearly list the time
range and days.
d. It doesn't matter.
it
5. A manufacturing company decides to buy solar cells in anticipation of rising electricity costs. The company is modeling its purchase to have $20,000 for the first year, and this saving increases 5% each year for the next 20 years as the solar cells generate enough electricity to compensate for the rising power bills. If the expected rate of return for the company equals 8%, what is the maximum amount of initial investment that makes this a desirable and profitable project
If the expected rate of return for the company equals 8%, the maximum amount of initial investment that makes this a desirable and profitable project is $11,385.20.
What is the present value?The present value is the discounted value of some future cash flows. It is computed using the present value formula or table. It can also be computed using an online finance calculator as follows:
For this project, we first calculate the future value of the cost-savings from the solar project based on $20,000 and 5% increases for 20 years as follows.
N (# of periods) = 20 years
I/Y (Interest per year) = 5%
PV (Present Value) = $20,000
PMT (Periodic Payment) = $0
Results:
FV = $53,065.95 ($20,000 + $33,065.95)
Total Interest = $33,065.95
Thereafter, we compute the present value of the above future value based on an 8% expected rate of return as follows:
N (# of periods) = 20 years
I/Y (Interest per year) = 8%
PMT (Periodic Payment) = $0
FV (Future Value) = $53,065.95
Results:
PV = $11,385.20
Total Interest = $41,680.75
Thus, if the expected rate of return for the company equals 8%, the maximum amount of initial investment that makes this a desirable and profitable project is $11,385.20.
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AuctionCo sells used products collected from different suppliers. Assume a customer purchases a used bicycle through AuctionCo for $300. AuctionCo agrees to pay the supplier $200 for the bicycle. The bicycle will be shipped to the customer by the original bicycle owner.Required:Assume AuctionCo takes control of this used bicycle before the sale and pays $200 to the supplier. Under this assumption, how much revenue would AuctionCo recognize at the time of the sale to the customer?Assume AuctionCo never takes control of this used bicycle before the sale. Instead, the bicycle is shipped directly to the customer by the original bicycle owner, and then AuctionCo pays $200 to the supplier. Under this assumption, how much revenue would AuctionCo recognize at the time of the sale to the customer?Assume AuctionCo promises to pay $200 to the supplier regardless of whether the bicycle is sold, but the bicycle will continue to be shipped directly from the supplier to the customer. Under this assumption, how much revenue would AuctionCo recognize at the time of the sale to the customer?
Answer:
$300 $100 $300
Explanation:
1. AuctionCo takes control of this used bicycle before the sale and pays $200 to the supplier.
Having taken control of the bicycle before the sale, the transaction will be treated as that of AuctionCo so the entire revenue will be theirs.
= $300
2. AuctionCo never took control.
Revenue will be the agency fee;
= Sales price - Supplier sales price
= 300 - 200
= $100
3. Assume AuctionCo promises to pay $200 to the supplier regardless of whether the bicycle is sold but the bicycle will continue to be shipped directly from the supplier to the customer.
= $300
Revenue is $300 because by being the ones to pay the supplier regardless of the occurrence of the transaction, they take control.
Federal Trade Commission (FTC) regulations require that: Multiple Choice all used cars be sold with a warranty. used car buyers be informed of whether or not the vehicle comes with a warranty. used cars with over 100,000 miles be sold only by the individual owner, not by a dealer. major repairs must be made on all used cars prior to being offered for sale. the seller of a defective used car pay half the cost of the required repairs.
Federal Trade Commission (FTC) regulations require that used car buyers be informed of whether or not the vehicle comes with a warranty.
What is the Federal Trade Commission
The Federal trade commission is a body that is saddled with the responsibility of enforceing federal consumer protection laws which are aimed at preventing fraud, deception and unfair business practices.
The Commission also prevents federal antitrust laws that guides against anticompetitive mergers and other business practices that could result in higher prices, fewer choices, or less innovation.
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The job satisfaction survey that asks employees to circle a picture that most closely matches their overall satisfaction with their job is called the ______.
The job satisfaction survey requiring employees to circle a picture most closely matching their overall satisfaction with their jobs is called A) faces scale.
What is a job satisfaction survey?
The job satisfaction survey is an employee satisfaction survey that gives an employee opportunity to supply feedback to the employers.
Answer Options:A) faces scale
B) pulse survey
C) visual job satisfaction survey
D) Job Satisfaction Survey.
Thus, the job satisfaction survey requiring employees to circle a picture most closely matching their overall satisfaction with their jobs is called A) faces scale.
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One of the most divisive and economically pressing questions in U.S. domestic policy over the last several decades has been healthcare. The United States spends twice as much in terms of Gross Domestic Product on healthcare as the next biggest spender in the advanced world, and yet our average lifespan is less than most of the countries on the list. The debate in the U.S. is over whether or not healthcare should be a part our larger commercial system, and hence accessed through private insurers giving the consumer more "choice," or whether healthcare access should be guaranteed to all through either a hybrid public/private system (like Obamacare) or a more robust public system in which healthcare is guaranteed to all residents through a government-run healthcare program, with a potential downside of having less "choice" in such a system. Public polling suggests that there is no bigger public policy issue that Americans care about as much as healthcare at this point in our nation's history. For the discussion, which of the various options listed above (or options that you have researched on your own) do you support as the way forward for the American healthcare system? Explain your answer, arguing for its superiority over the other options.
Answer:
The best choice for the United States would be a system in which everyone is covered by insurance, where a public robust option exists, but where there are also private options that can become spcialized in less essential care like comestic plastic surgery, or cosmetic dental care.
For this system to work better and to reduce the high spending in healthcare as percentage of GDP, many managerial jobs in the insurance industry should be cut, and only those that are essential should be kept.
The private options should be kept under a more rigid oversight so that they do not overcharge their users for services or prescription drugs.
Finally, the public option should be robust, insurance every person who cannot afford private insurance, and the government should make sure that it is well-funded.
Lanni Products is a start-up computer software development firm. It currently owns computer equipment worth $30,000 and has cash on hand of $20,000 contributed by Lanni's owners.
a. Lanni takes out a bank loan. It receives $50,000 in cash and signs a note promising to pay back the loan over three years.
b. Lanni uses the cash from the bank plus $20,000 of its own funds to finance the development of new financial planning software.
c. Lanni sells the software product to Microsoft, which will market it to the public under the Microsoft name.
d. Lanni accepts payment in the form of 2,000 shares of Microsoft stock. Lanni sells the shares of stock for $70 per share and uses part of the proceeds to pay off the bank loan.
Required:
a. Prepare its balance sheet just after it gets the bank loan.
b. What is the ratio of real assets to total assets?
c. Prepare the balance sheet after Lanni spends the $70,000 to develop its software product.
Answer:
Lanni Products
a. Lanni Products
Balance Sheet after the bank loan
Assets:
Cash $70,000
Equipment 30,000
Total assets $100,000
Liabilities:
Bank Loan $50,000
Equity $50,000
Liabilities + Equity $100,000
b. Ratio of real assets to total assets = $30,000/$100,000 = 0.3 or 30%
c. Lanni Products
Balance Sheet after spending the bank loan
Assets:
Cash $0
Software $70,000
Equipment 30,000
Total assets $100,000
Liabilities:
Bank Loan $50,000
Equity $50,000
Liabilities + Equity $100,000
Explanation:
a) Data and Calculations:
Lanni Products
Balance Sheet before the bank loan
Assets:
Cash $20,000
Equipment 30,000
Total assets $50,000
Equity $50,000
b) Lanni's Balance Sheets show its financial positions after each of the above mentioned transactions. They rely on the accounting equation with assets = liabilities and equity. With each transaction posted correctly, the equation remains in balance.
Professor Smith and Professor Jones are going to produce a new introductory textbook. As true scientists, they have laid out the production function for the book as: q=S1/2J1/2 Where q is the number of pages in the finisjed book, S is the number of working hours spent by Smith, and J is the number of working hours spent by Jones. After having spent 900 hours preparing the first draft, time which he valued at $3 per working hour, Smith has to move on to other things and cannot contribute any more to the book. Required:
a. How many hours will Jones have to spend to produce a finished book of 150 pages? Of 300 pages? Of 450 pages?
b. What is the marginal cost of the 150th page of the finished book? Of the 300th page? Of the 450th page?
The time taken that Jones will spend to produce a finished book of 150 pages is 25 hours.
How to calculate the time taken?The number of hours to produce a finished book of 150 pages will be:
q = ✓SJ
150 = ✓900 × ✓J
J = 150²/30²
J = 25
The number of hours to produce a finished book of 300 pages will be:
J = (300)² / 30²
= 100
The number of hours to produce a finished book of 450 pages will be:
= 450² / 30²
= 225 hours.
The marginal cost of the 150th page of the finished book will be:
= 4q/150
= (4 × 150)/150
= 4
The marginal cost of the 300th page of the finished book will be:
= (4 × 300)/150
= 8
The marginal cost of the 450th page of the finished book will be:
= (4 × 450) / 150
= 12
In conclusion, the marginal cost of the 450th page is $12.
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Hakara Company has been using direct labor costs as the basis for assigning overhead to its many products. Under this allocation system, product A has been assigned overhead of $27.80 per unit, while product B has been assigned $13.23 per unit. Management feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and cost driver information:
Cost Pools Activity Costs Cost Drivers Activity Driver Consumption
Machine setup $360,000 Setup hours 4,000
Materials handling 85,000 Pounds of materials 17,000
Electric power 50,000 Kilowatt-hours 25,000
The following cost information pertains to the production of A and B, just two of Hakara's many products:
A B
Number of units produced 4,000 10,000
Direct materials cost $39,000 $38,000
Direct labor cost $22,000 $27,000
Number of setup hours 100 200
Pounds of materials used 2,000 2,000
Kilowatt-hours 2,000 4,000
Required:
Use activity-based costing to determine a unit cost for each product.
Answer:
Unitary cost A= $21
Unitary cost= $10.1
Explanation:
First, we need to calculate the predetermined overhead rate for each activity:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Machine setup= 360,000/4,000= $90 per setup hour
Materials handling= 85,000/17,000= $5 per pound
Electric power= 50,000/25,000= $2 per killowat
Now, we can allocate overhead to each product:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Product A:
Machine setup= 90*100= $9,000
Materials handling= 5*2,000= $10,000
Electric power= 2*2,000= $4,000
Total= $23,000
Product B:
Machine setup= 90*200= $18,000
Materials handling= 5*2,000= $10,000
Electric power= 2*4,000= $8,000
Total= $36,000
Finally, the total cost and unitary cost:
Product A:
Total cost= 39,000 + 22,000 + 23,000= $84,000
Unitary cost= 84,000/4,000= $21
Product B:
Total cost= 38,000 + 27,000 + 36,000= $101,000
Unitary cost= 101,000/10,000= $10.1
Henry Company allocates overhead cost using a single plantwide rate of $80 per direct labor hour. Each product unit uses three direct labor hours and 2 machine hours. The overhead cost per unit is:
The overhead cost per unit for Henry Company, which allocates overhead cost using a single plantwide rate of $80 per direct labor hour, is $240.
What is a single plantwide overhead rate?The single plantwide overhead rate is the rate that a company uses to allocate all of its manufacturing overhead costs to products or cost objects where the activity-based costing system is not used.
The single plantwide overhead rate is calculated by dividing the total estimated manufacturing overhead costs by the total estimated direct labor hours or machine hours, as the case may be.
Data and Calculations:Predetermined overhead rate = $80
Direct labor hour per unit = 3 hours
Machine hours per unit = 2 hours.
The overhead cost per unit = $240 ($80 x 3)
Thus, the overhead cost per unit for Henry Company, which allocates overhead cost using a single plantwide rate of $80 per direct labor hour, is $240.
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The Ingraham Corporation has $1,000 par value bonds outstanding. The bonds have an annual coupon rate of 8.90 percent and an annual yield to maturity of 8.03 percent. The annual inflation rate is 2.66 percent. What is the real rate of return on the bonds?
Based on the inflation rate and the yield to maturity, the real rate of return on the bonds will be 5.23%.
What is the real rate of return?This can be found by the formula:
= (( 1 + nominal Return) / ( 1 + Inflation rate)) - 1
Solving gives:
= ( ( 1 + 8.0%) / ( 1 + 8.90%)) - 1
= 1.0523 - 1
= 5.23%
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(Ignore income taxes in this problem.) Alesi Corporation is considering purchasing a machine that would cost $283,850 and have a useful life of 5 years. The machine would reduce cash operating costs by $81,100 per year. The machine would have a salvage value of $107,100 at the end of the project. (Assume the company uses straight-line depreciation.) Required: a. Compute the payback period for the machine. (Round your answer to 2 decimal places.) b. Compute the simple rate of return for the machine. (Round your intermediate answers to nearest whole dollar and your final answer to 2 decimal places.)
Answer:
(A) Payback period for the machine= 3.5 years
(B) Simple rate of return for the machine= 87.5%
Explanation:
Alesu corporation is considering purchasing a machine that would cost $283,850
The useful life is 5 years
The machine would reduce cash operating costs by $81,100 per year
The salvage value is $107,100
(A) The payback period for the machine can be calculated as follows
= cost/amount of cash flow
= 283,850/81,100
= 3.5 years
(B) The simple rate of return for the machine can be calculated as follows
First we calculate the depreciation expense
= 283,850-107,100/5
= 176,750/5
= 35,350
Annual incremental income= cost savings -depreciation expenses
= 283,850-35,350
= 248,500
Simple rate of return = annual incremental income/cost × 100
= 248,500/283,850 × 100
= 0.875 × 100
= 87.5%
Determine which of the following annual gifts are subject to gift taxes and to what extent they need to be included in an estate.
a. Grandfather have a grandchild $24,000 for the purchase of a new car.
b. Father gave $35,000 to a son to start a small business.
c. Parents paid $35,000 to Wellesley College for their daughter's tuition.
d. Sister paid $47,000 of her brother's qualified medical expenses to Duke Medical Center.
e. Widow gave $105,000 to charity.
f. Mother gave a daughter a life insurance policy with a face value of $50,000 and a cash value of $10,000 two years prior to the mother's death.
Answer:
a. Grandfather have a grandchild $24,000 for the purchase of a new car.
Subject to gift tax.
b. Father gave $35,000 to a son to start a small business.
Not subject to gift tax
c. Parents paid $35,000 to Wellesley College for their daughter's tuition.
Not subject to gift tax
d. Sister paid $47,000 of her brother's qualified medical expenses to Duke Medical Center.
Not subject to gift tax
e. Widow gave $105,000 to charity.
Subject to gift tax
f. Mother gave a daughter a life insurance policy with a face value of $50,000 and a cash value of $10,000 two years prior to the mother's death.
Subject to gift tax
Explanation:
Two companies require identical skills and training from their workers. Both employ 10,000 people. On average, RealSafe has one worker fatality per year, while NotsoSafe has two worker fatalities per year. Jobs at RealSafe pay $50,000/year, while jobs at NotsoSafe pay $50,500/year. In the space below, answer the following questions, delineated by question number:_______.
1. Why do these jobs with identical requirements pay different salaries, based on the information presented here?2. What is the risk for a worker of a fatal accident at each company? What is the pay premium associated with that risk?3. The value of a statistical life is the difference in wage divided by the difference in risk. What is the value of a statistical life for workers with these skills and training?4. Do you expect this value of a statistical life to be appropriate for the population as a whole? Why or why not?
Explanation:
1. If the salary paid by both companies were same people would prefer to work at Realsafe since it more safer. But not too safe provides a higher pay which makes people accept the higher risk over there.
2.The for a worker at Realsafe is 1/10000, while at not to safe it’s 2/10000. The premium associated with that risk Is the $500/year from not to safe.
3. Value of statistical life
= 1*$500 / 1/10000
= 5,000,000.
4. If the value of statistical life is constant across all the population it’s acceptable and valid.
Common stock, par $12 per share, 49,000 shares outstanding. Preferred stock, 8 percent, par $17.5 per share, 7,710 shares outstanding. Retained earnings, $238,000. On January 1, 2019, the board of directors was considering the distribution of a $63,800 cash dividend. No dividends were paid during 2017 and 2018. Required: Determine the total and per-share amounts that would be paid to the common stockholders and to the preferred stockholders under two independent assumptions: The preferred stock is noncumulative. The preferred stock is cumulative. Why were the dividends per share of common stock less for the cumulative preferred stock than the noncumulative preferred stock
Answer:
a. The Preferred stock is noncumulative.Preferred stock
= 7,710 * 17.5 * 8%
= $10,794
Per share
= 10,794/7,710
= $1.40
Common Shareholders.
= 63,800 - 10,794
= $53,006
Per share
= 53,006/49,000
= $1.08
b. Preferred stock is cumulative.This means that if preferred dividends are not paid in a year, they will be accrued and paid when they can.
Preferred stock
= 7,710 * 3 years (2017,2018,2019)
= $23,130
Per share = 23,130/7,710
= $3
Common stock
= 63,800 - 23,130
= $40,670
Per share
= 40,670/49,000
= $0.83
c. Why were the dividends per share of common stock less for the cumulative preferred stock than the noncumulative preferred stock?
b. The dividends in arrears on the preferred stock had to be fulfilled before dividends could be paid for the current year.
John Roberts is 51 years old and has been asked to accept early retirement from his company. On July 1, the company offered John three alternative compensation packages to induce John to retire:
1. $180,000 cash payment to be paid immediately.
2. A 16-year annuity of $18,000 beginning immediately.
3. A 10-year annuity of $52,000 beginning on July 1 of the year John reaches age 61 (after 10 years).
Required:
Determine the present value, assuming that he is able to invest funds at a 7% rate, which alternative should John choose?
Answer:
John should choose option 3 which is a 10 year annuity starting after 10 years from today as the present value of this option which is $185662.50 is higher than the present value of option 1 and option 2 which are $180000 and $181942.45 respectively.
Explanation:
1.
The present value of option 1 is equal to the cash payment received today. Thus, it is the same.
PV - Option1 = $180000
2.
The option 2 is an annuity due as the annuity is beginning immediately. The formula to calculate the present value of annuity due is attached in attachment.
PV - Option 2 = 18000 * [(1 - (1+0.07)^-16) / 0.07] * (1+0.07)
PV - Option 2 = $181942.4521 rounded off to $181942.45
3.
To calculate the present value of option 3 which is an ordinary annuity of 10 years and which will start after 10 years, we will use the present value of annuity ordinary formula as provided in the attachment to calculate the value of annuity when John will be 61 that is 10 years from now. Then we will discount that value of annuity to today's value to calculate the present value.
Value of Ordinary annuity (10 years from now) = 52000 * [(1 - (1+0.07)^-10) / 0.07]
Value of Ordinary annuity (10 years from now) = 365226.2401
The present value of this annuity will be = 365226.2401 / (1+0.07)^10
PV - Option 3 = $185662.5006 rounded off to $185662.50
Companies normally pay dividends quarterly and they go through a specific process. Firms first declare the quarterly dividend. The declaration date is the date on which a firm's directors issue a statement declaring a dividend. The company closes its stock transfer books at the close of business on the holder-of-record date. If the company lists the stockholder as an owner on this date, then the stockholder receives the dividend. The ex-dividend date is the date on which the right to the current dividend no longer accompanies a stock; it is usually two business days prior to the holder-of-record date. Finally, the payment date is the date on which a firm actually mails dividend checks. Give the correct response to the following question. Seller sells Indigo Company stock to Buyer on the ex-dividend date. Which of the following statements is correct?
a. Neither Seller nor Buyer will receive the dividend. The dividend rolls over to a special account for the next quarter's dividend.
b. Buyer is now the owner of the stock, so Buyer receives the dividend.
c. Because the stock was sold on the ex-dividend date, a special rule applies where the dividend is divided between Buyer and Seller
d. Because the stock was sold on the ex-dividend date, Seller would still be considered the owner of the stock and would receive the dividend
Answer:
d. Because the stock was sold on the ex-dividend date, Seller would still be considered the owner of the stock and would receive the dividend
Explanation:
since the buyer purchased on ex dividend date he will not receive the next dividend but the seller will. If he had purchased before the ex dividends date he would receive next dividend. Ex dividend dates are usually one to two business days before record date or holder of record date in which owner of stock is recorded. However the ex dividend date does not consider stock holder as per stock transfer until holder of record date
The Carbondale Hospital is considering the purchase of a new ambulance. The decision will rest partly on the anticipated mileage to be driven next year. The miles driven during the past 5 years are as follows:
Year Mileage
1 3000
2 4000
3 3400
4 3800
5 3700
Required:
a. Forecast the mileage for next year using a 2-year moving average.
b. Find the MAD based on the 2-year moving average forecast in part (a), (Hint: You will have only 3 years of matched data.)
c. Use a weighted 2-year moving average with weights of .4 and .6 to forecast next year's mileage. (The weight of .6 is for the most recent year.) What MAD results from using this approach to forecasting? (Hint: You will have only 3 years of matched data.)
d. Compute the forecast for year 6 using exponential smoothing, an initial forecast for year 1 of 3,000 miles, and a = 0.5.
Answer: See explanation
Explanation:
a. The moving average is calculated as:
= sum demand for 2 yr/2
The moving average for next year will be:
= (3800+3700)/2
= 7500/2
= 3,750 Miles
(b) The mean absolute deviation(MAD)
= Sum(|Dt-Ft|)/n
Therefore, the moving average for Y3 will be:
= (3000+4000)/2
= 7000/2
= 3500
Moving Avge for Y4 F(4) will be:
= (4000+3400)/2
= 3700
Moving Avge for Y5 will be:
= (3400+3800)/2
= 7200/2
= 3600
Therefore, MAD will be:
= Sum (|3500-3400|+|3700-3800|+|3600-3700|)/3
(100+100+100)/3
= 300/3
= 100
(c) Weighted moving average = sum (weight in period n) × (demand in period n)/Sum weights
So Weighted moving average for Y6 will be:
= ((3800 × 0.4)+(3700 × 0.6))/(0.4+0.6)
=1520 + 2220
= 3,740
MEAN ABSOLUTE DEVIATION:
= Sum(|Dt-Ft|)/n
Weighted moving average for Y3:
= (3000 × 0.4c+ 4000 × 0.6)/(0.4+0.6)
= 3600
Weighted moving average for Y4:
= (4000 × 0.4 + 3400 × 0.6)/(0.4+0.6)
= 3640
Weighted moving average for Y5:
= (3400 × 0.4+3800 × 0.6)/(0.4+0.6)
= 3640
Therefore, MAD
= Sum(|3600-3400|+|3640-3800|+|3640-3700|)/3
MAD = (200+160+60)/3 = 140
(d)Expomentioal Smoothing F(t) will now be:
SO F(1) = 3000 + 0.5 × (3000-3000)
= 3000
F(2) = 3000 + 0.5 × (4000-3000)
= 3500
F(3) = 3500 + 0.5 × (3400-3500)
= 3450
F(4) = 3450 + 0.5 × (3800-3450)
= 3625
F(5) = 3625 + 0.5 × (3700-3625)
= 3663
Therefore, forecast will now be 3663 miles
A. The moving average is 3,750 Miles
B. The mean absolute deviation(MAD) 100
C. Weighted moving average 3,740
D. Exponential Smoothing F(t) 3663 Miles
Calculation of Weighted averagea. When The moving average is calculated as:
Then = sum demand for 2 yr/2
After that The moving average for next year will be:
Then = (3800+3700)/2
Now, = 7500/2
= 3,750 Miles
(b) When The mean absolute deviation(MAD)
Then = Sum(|Dt-Ft|)/n
Therefore, When the moving average for Y3 will be:
Then = (3000+4000)/2
After that = 7000/2
= 3500
Then the Moving average for Y4 F(4) will be:
After that = (4000+3400)/2
Then = 3700
Now Moving average for Y5 will be:
After that = (3400+3800)/2
Then = 7200/2
= 3600
Now MAD will be:
Then = Sum (|3500-3400|+|3700-3800|+|3600-3700|)/3
(100+100+100)/3
After that = 300/3
= 100
(c) When the Weighted moving average is = sum (weight in period n) × (demand in period n)/Sum weights
So The Weighted moving average for Y6 will be:
then = ((3800 × 0.4)+(3700 × 0.6))/(0.4+0.6)
After that =1520 + 2220
Then = 3,740
The MEAN ABSOLUTE DEVIATION:
Then = Sum(|Dt-Ft|)/n
When the Weighted moving average for Y3:
After that = (3000 × 0.4c+ 4000 × 0.6)/(0.4+0.6)
= 3600
Weighted moving average for Y4:
Then = (4000 × 0.4 + 3400 × 0.6)/(0.4+0.6)
= 3640
Then Weighted moving average for Y5:
= (3400 × 0.4+3800 × 0.6)/(0.4+0.6
= 3640
Thus, MAD
Therefore = Sum(|3600-3400|+|3640-3800|+|3640-3700|)/3
MAD is = (200+160+60)/3 = 140
(d) The Exponential Smoothing F(t) will now be:
SO F(1) = 3000 + 0.5 × (3000-3000)
Then = 3000
F(2) = 3000 + 0.5 × (4000-3000)
Then = 3500
F(3) = 3500 + 0.5 × (3400-3500)
After that = 3450
F(4) = 3450 + 0.5 × (3800-3450)
Then = 3625
F(5) = 3625 + 0.5 × (3700-3625)
Now, = 3663
Thus, forecast will now be 3663 miles
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In early January 2019, Outkast Corporation applied for a trade name, incurring legal costs of $16,000. In January 2020, Outkast incurred $7,800 of legal fees in a successful defense of its trade name. Instructions a. Compute 2019 amortization, 12/31/19 book value, 2020 amortization, and 12/31/20 book value if the company amortizes the trade name over 10 years. b. Compute the 2020 amortization and the 12/31/20 book value, assuming that at the beginning of 2020, Outkast determines that the trade name will provide no future benefits beyond December 31, 2023. c. Ignoring the response for part .b., compute the 2021 amortization and the 12/31/21 book value, assuming that at the beginning of 2021, based on new market research, Outkast determines that the fair value of the trade name is $15,000. Estimated total future cash flows from the trade name is $16,000 on January 3, 2021.
Answer:
A) for 2019 :
Amortization = $16000 / 10 years = $1600
Book value = $16000 - $1600 = $14400
for 2020 :
Amortization = [book value ( for 2019 ) - $7800]/9years =
= [$14400 - $7800] / 9 = $2467
Book value = $14000 + $7800 - $2467 = $19333
B) for 2020
Amortization = ( $14400 + $7800 ) / 4 = $5550
Book value = $14400 + $7800 - $5500 = $16650
C) Amortization = $15000 / 8 = $1875 ( after the impairment loss )
Book value = $15000 - $1875 = $13125
Explanation:
Given data:
In early January 2019 outklast corporation incurred legal costs = $16000
In January 2020 outklast incurred $7800
A)
For 2019
Amortization = $16000 / 10 years = $1600
Book value = $16000 - $1600 = $14400
For 2020
Amortization = [book value ( for 2019 ) - $7800]/9years =
= [$14400 - $7800] / 9 = $2467
Book value = $14000 + $7800 - $2467 = $19333
B)
For 2020
Amortization = ( $14400 + $7800 ) / 4 = $5550
Book value = $14400 + $7800 - $5500 = $16650
C) Carrying amount ($19,333) > future cash flows ($16,000); thus the trade name fails the recoverability test. The new carrying value is $15,000.
Amortization = $15000 / 8 = $1875 ( after the impairment loss )
Book value = $15000 - $1875 = $13125
The terms “sales” and “marketing” can be used interchangeably.
True
False
Answer:
False
Explanation:
Sales is all about you: your products, your services, and your business. Marketing on the other hand, is all about your customers. Whether inbound, outbound, or all around, it's all about them. Although not interchangeable, the sales and marketing are definitely interwined.
Paula sells boomerangs. The price elasticity of demand for boomerangs is 0.54. If Paula wishes to increase her revenue, should she raise or lower the price of boomerangs? Explain your answer in a few sentences.
To increase her Revenue when selling Boomerangs, Paula should decrease the price rather than increase it.
What is the price elasticity of demand?This refers to how much the demand for a product (wish for the buyers to buy the product) changes when there is a price change.
What does a 0.54 in price elasticity of demand mean?This ratio implies that if the price changes by 1% the demand changes by 0.54%. This means there is not a very big change in the demand or the product is not very elastic, and therefore if the increases the price the revenue will stay the same.
Based on this, to increase her Revenue Paula should decrease the price since this can catch the attention of new potential customers.
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